What's in Your Wallet: Why You'll Soon Get Safer Credit Cards

What's in Your Wallet: Why You'll Soon Get Safer Credit Cards

The same magnetic-strip technology has been protecting Americans’ account data for 50 years—and it’s made us far too popular. About half of all credit card fraud worldwide happens in the U.S., according to a recent Barclays report.

But change is coming: By this fall, millions of Americans will have received new credit and debit cards enabled with the more secure chip-based technology that’s been common in much of the world since the 1990s. Chip cards are tougher to replicate and give each transaction a unique code, making it impossible for a hacker to use that code to make another purchase.

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So what to expect at checkout? Instead of swiping your plastic to make a purchase, you’ll insert it and wait—as you already do when using a card at an ATM machine or at many laundromats. For now, you’ll still need to provide your signature, though eventually that will be replaced by the more secure approach of entering a four-digit PIN.

The upgrade to chip technology is a welcome shift for consumers, who will be less likely to face the hassles of dealing with a fraudulent credit card transaction. In fact, some Americans already have the cards in hand: Bank of America began transitioning in late 2014 and Chase and Citi are rolling out the changes this summer.

For merchants, it’s more complicated. Tens of thousands of businesses are now required to replace equipment and retrain employees to meet a soft deadline of October 1st.

In a liability shift, these businesses—not the banks—will be responsible for paying out any credit or debit fraud that happens in their stores if they haven’t upgraded by October.

RELATED: 7 Things You've Always Wanted to Know About Credit Card Rewards

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